One of those lawmakers is State Senator Robert “Tommy” Tomlinson, who voiced several concerns during the most recent online gambling hearing in front of the Senate CERD (Community, Economic, and Recreational Development) Committee.
I’d argue that Tomlinsons concerns are not only off-base, but are in fact preventing him from appreciating the beneficial impact regulation would have on land-based casino revenue (and overall tax take).
One concern raised by Tomlinson was imposing a tax rate on iGaming below the current rate imposed on casinos – 54% for slots and 14% for table games.
Tomlinson’s concern is that a tax rate of 14% (or thereabouts) would lead to casinos shifting their focus from their brick and mortar operations to online gaming.
This worry is false on face, as brick and mortar casinos have the potential to generate hundreds of millions of dollars in revenue annually, while an online casino would be happy eclipsing $50 million in revenue over a calendar year.
Or as my colleague Robert DellaFave put it, it’s like saying you’d close your gold mine because you found a vein of copper.
— Robert DellaFave (@RobertDellaFave) June 17, 2015
The next questionable claim from Tomlinson: he knows of a Pennsylvania casino that has lost 20% of its players since New Jersey legalized online gambling.
Since I will be parsing his claim, here it is in full:
“In fact, I know at least one casino that’s lost probably 20% of their players (emphasis his) back to New Jersey.”
This statement would receive several Pinocchios from the Washington Post fact checkers.
What Senator Tomlinson is almost certainly referring to is a claim made by the Parx Casino that since New Jersey legalized online gambling, Parx has seen a 20% decrease in visitation from New Jersey players in their poker room.
Contrary to Senator Tomlinson’s claim, Parx hasn’t lost 20% of its customers since New Jersey legalized online gambling; their poker room has seen foot traffic from New Jersey decrease by 20%.
This isn’t an insignificant amount, as a source familiar with the situation indicated New Jersey residents account for 40% of Parx’s poker room players.
This means poker room traffic is down 8% overall – 20% of 40% – at Parx since New Jersey legalized online gambling.
However, far from making Senator Tomlinson’s point about potential cannibalization, the reduction of New Jersey poker players at Parx Casino reinforces recent research that indicates online gambling is beneficial to land-based gaming.
Tomlinson’s mischaracterization implies that these players no longer play poker in a casino now that they have the option to play online.
However, he quickly contradicted himself when he later stated that New Jersey casinos were luring players (players from New Jersey, mind you) back to their properties through online qualifiers and comps.
Tomlinson also admitted that many players in Western New Jersey frequent the closer casinos in Pennsylvania rather than Atlantic City.
A close examination of Tomlinson’s own words debunk the idea of cannibalization.
This is not cannibalization. It’s competition – for customers between Pennsylvania and Atlantic City, and the scales are tipping in Atlantic City’s favor because it offers something Pennsylvania doesn’t: online gambling.
These players haven’t stopped playing casino poker because of online poker, they’ve simply been lured back to Atlantic City by the online sites they now use in addition to playing poker at casinos.
If Parx and other Pennsylvania casinos wants to keep these players from choosing AC over their properties, they need to have the same bait.
And that bait is regulated online gambling.
That’s why Pennsylvania’s land-based casinos are calling for it. That’s why Penn National called online gambling a “vital tool to enable our industry to continue to evolve and protect what we’ve built here.”
If Senator Tomlinson wants to stop New Jersey from poaching the players in Western New Jersey that Pennsylvania casinos poached from Atlantic City, the smart move would be to legalize online gambling, not prevent it.
If Pennsylvania fails to pass an online gambling bill, its casinos will be cannibalized by New Jersey’s – and not because iGaming preys upon brick and mortar gaming, but because Atlantic City casinos can use iGaming as a marketing tool to entice these customers who are able to choose between AC and eastern Pennsylvania casinos.
The idea that online gambling cannibalizes brick and mortar casinos is wrong, as the players haven’t stopped going to casinos, they simply go to different casinos, proving that online gaming is beneficial to land-based gaming.